Punch back with IPO

Punch Taverns is to proceed with its IPO plans although the size and price of the offer are being reduced.

Punch Taverns, which is presently majority owned by US private equity firm Texas Pacific, has announced that it will complete its initial public offering later this week following last week’s cancellation of the flotation due to investor unease about the company’s valuation and continued nervousness in the new issues market. 

The shares will now be offered at a launch price of 230p, eight per cent lower than the initial book-building base price of 250p and 16 per cent below the mid-price of 275p. The company, which was originally planning to sell 115 million shares, has also reduced the size of the offering to 75.6 million shares. The offer would have raised £316m if it had priced in the midpoint of its original range, almost double the new target total of £173.9m.

The offering will give the leased and tenanted pubs group, that owns 4,250 properties, a market capitalisation of around £570m, and an enterprise value of £2bn, including around £1.4bn pounds of debt. 

Merrill Lynch was bookrunner of the Punch IPO with Deutsche Bank and SSSB as global managers. It is understood that the same three banks will lead the second attempt at the IPO. A successful listing will come as a relief to prospective market entrants, who have seen a number of IPO cancellations over the past weeks. Punch and its bankers will also be watching how the share price performs after launch: the recent UK float of HMV saw its price drift lower immediately. A more robust performance in the aftermarket will encourage issuers, underwriters and investors alike.